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SASSOWER v. FIELD

September 5, 1990

ELENA RUTH SASSOWER AND DORIS L. SASSOWER, PLAINTIFFS,
v.
KATHERINE M. FIELD, CURT HAEDKE, LILLY HOBBY, WILLIAM IOLONARDI, JOANNE IOLONARDI, ROBERT RIFKIN, INDIVIDUALLY, AND AS MEMBERS OF THE BOARD OF DIRECTORS OF 16 LAKE STREET OWNERS, INC., HALE APARTMENTS, DESISTO MANAGEMENT, INC., 16 LAKE STREET OWNERS, INC., AND ROGER ESPOSITO, INDIVIDUALLY, AND AS AN OFFICER OF 16 LAKE STREET OWNERS, INC., DEFENDANTS.



The opinion of the court was delivered by: Goettel, District Judge.

OPINION

I. FACTS

This contentious litigation arises from a relatively simple set of facts. Defendant 16 Lake Street Owners, Inc. is the owner of the real property and cooperative apartment building located at 16 Lake Street, White Plains, New York. Defendants Field, Hobby, Haedke, W. Iolonardi and Rifkin, constituting the Board of Directors, are authorized to act upon applications to purchase stock and the corresponding proprietary lease as well as applications to sublet apartments in the building. John McFadden is the proprietary lessee for apartment 2C of the 16 Lake Street building and is the owner of 548 shares of stock in 16 Lake Street Owners, Inc.*fn1

By contract dated October 29, 1987, John McFadden agreed to transfer his 548 shares of stock in 16 Lake Street Owners, Inc. and the proprietary lease for apartment 2C, to plaintiffs Elena Ruth Sassower and Doris L. Sassower. After the agreement was signed, Elena Sassower and her father, George Sassower, took possession of the apartment as their principal residence in accordance with the contract terms. They remain in possession to date. In January 1988, the plaintiffs applied for a loan commitment to purchase the stock shares and proprietary lease for apartment 2C and received that commitment in April 1988. In May 1988 the plaintiffs were interviewed by certain members of the admissions committee of 16 Lake Street Owners, Inc. By letter to the defendant DeSisto Management, Inc., the managing agent for 16 Lake Street Owners, Inc., dated May 19, 1988, the Board of Directors denied the plaintiffs' application to purchase the stock shares and proprietary lease for apartment 2C from John McFadden. By letter dated May 20, 1988, DeSisto Management informed the plaintiffs of this decision. The plaintiffs and John McFadden subsequently requested that the Board of Directors reconsider its decision. On June 14, 1988, the Board of Directors unanimously voted to deny the plaintiffs' request for reconsideration of the original decision disapproving the purchase application.

In August 1988, the plaintiffs commenced this lawsuit alleging eight causes of action against the various defendants. Those actions may be summarized as follows: violations of the federal Fair Housing Act, 42 U.S.C. §§. 3601-3631 (1982); violations of the federal Civil Rights Act, 42 U.S.C. § 1983 (1982); violations of New York Human Rights Law, N.Y.Exec.Law § 296(5)(a) (1982); violations of New York Civil Rights Law, N YCiv.Rights Law § 19-a (1982); failure to comply with the provisions of the corporate by-laws and the proprietary lease governing transfers; breach of the duty of good faith; intentional infliction of emotional distress; unequal treatment of shareholders; breach of fiduciary duty; and failure to comply with its own policies. The plaintiffs' allegations of discrimination, contained primarily in the first cause of action, are based on their contention that the defendants' decision to deny their application to purchase the shares and proprietary lease for apartment 2C was made on account of their status as single, Jewish women.*fn2

Defendants 16 Lake Street Owners, Inc. and the individually named members of the Board of Directors (collectively referred to as the "Lake Street defendants") have moved for summary judgment. Also moving for summary judgment at this time are defendant Hale Apartments, whose involvement is described in section III below, and defendant DeSisto Management.*fn3 The plaintiffs vigorously oppose the motions.*fn4

II. SUMMARY JUDGMENT STANDARD

Fed.R.Civ.P. 56(c) provides that summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." The burden is on the moving party to demonstrate the absence of a material, factual dispute. Fed.R.Civ.P. 56(e); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Once that burden is met, the non-moving parties "must set forth specific facts showing that there is a genuine need for trial," Fed.R.Civ.P. 56(e), and there must be more than merely "some metaphysical doubt as to [those] material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). They cannot simply rest on their pleadings. Fed.R.Civ.P. 56(e); First Nat'l Bank v. Cities Services Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968). In determining whether a sufficient showing has been made, however, the court must draw all reasonable inferences and resolve all ambiguities in favor of the non-moving parties. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam).

III. DEFENDANT HALE APARTMENTS

Defendant Hale Apartments is the former owner of the building located at 16 Lake Street, and was the sponsor of the plan which converted the building from rental to cooperative ownership. On August 2, 1983, defendant 16 Lake Street Owners, Inc. purchased the building from Hale Apartments pursuant to the conversion plan. Upon the conversion, Hale Apartments became the owner of the unsold shares of the apartment corporation allocated to the unsold apartments and acquired the proprietary leases appurtenant thereto.

In 1986, Hale Apartments allegedly ceased to exist*fn5 and transferred its unsold shares in the apartment corporation to a tenancy in common consisting of twelve individuals.*fn6 Each year since 1986, Hale Apartments' successor tenancy voted all of its shares for the election of Robert A. Rifkin to the board of directors. Robert Rifkin is also a member of the tenancy in common.

The plaintiffs' claims against Hale Apartments are unique. Essentially, they seek to double-pierce the corporate veil. Not only do they contend that Robert Rifkin is individually liable for the board of directors' decision to deny the plaintiffs' application, but they further contend that Hale Apartments is vicariously liable for Robert Rifkin's conduct.*fn7 The plaintiffs' position, however, suffers from both factual and legal defects.

Initially, the affidavit of Robert Rifkin unequivocally states that he was not involved in the initial decision to deny the plaintiffs' application. That decision was made by three board members, defendants Curt Haedke, Lilly Hobby and William Iolonardi, after their interview with the plaintiffs.*fn8 Mr. Rifkin's affidavit is corroborated by the deposition testimony of John McFadden who stated that "[t]he people who made the determination were the people who held the interview; Daisy Hobby, Curt Haedke and Bill Iolonardi." McFadden Deposition at 208. Mr. Rifkin's only involvement in the decision to deny the plaintiffs' application was his participation in the unanimous vote of the board of directors on June 14, 1988 declining to reconsider the first decision of the three board members.

Although the plaintiffs decline to admit this factual scenario in their 3(g) statement, they fail in all respects to controvert it. They offer no proof whatsoever that Robert Rifkin was involved in the initial decision to deny the plaintiffs' application. We harbor grave doubts that Robert Rifkin's vote against reconsidering the original denial of the plaintiffs' application permits any inference of discrimination or misconduct. See Irizarry v. 120 West 70th Owners Corp., No. 86-3503, slip op., 1986 WL 8073 (S.D.N.Y. July 15, 1986) (board member absent at decisional meeting cannot be held liable individually or as a director of the owner/corporation).

Even allowing, however, that such conduct might be sufficient to impose liability on 16 Lake Street Owners, Inc. and, perhaps, Robert Rifkin individually, the plaintiffs' attempt to hold Hale Apartments vicariously liable is insupportable. The plaintiffs contend that the election of Robert Rifkin to the board of directors was, in essence, the creation of an express agency relationship. Consequently, the plaintiffs argue that Hale Apartments is bound by Rifkin's actions and liable for his alleged misdeeds.

The tenancy in common that makes up the entity called Hale Apartments is a large shareholder of 16 Lake Street Owners, Inc. Holding over 15% of the outstanding shares of the corporation, the twelve members of the tenancy in common have the power to vote together and elect one member of the board of directors. They do not have the power to affect the conduct of the corporation directly. Their only authority is through their elected directors. See Continental Securities Co. v. Belmont, 206 N.Y. 7, 16, 99 N.E. 138 (1912). Once elected, a member of a board of directors acts for the corporation and his actions will be attributed to the corporation. See generally W. Cary & M. Eisenberg, Corporations 381 (5th ed. 1980) ("The directors' duties are, in the main, duties owed to the corporate entity as such rather than to the shareholders or creditors individually. . . ."). Although the member of the board may consider the interests of those who elected him and may act in furtherance of their goals, he is not, by virtue of his election, their designated agent. Thus, we cannot say that the actions of Rifkin as a member of the board of directors can be attributed to Hale Apartments. To say otherwise would be to ...


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